Traditionally, energy is delivered to end-users from generation facilities via what is often referred to as the “grid.” FIG. 1A illustrates an example of a traditional energy delivery system 10. Energy can be generated at a generation facility 12, e.g., coal power plants, nuclear power plants, hydroelectric power plants, wind farms and/or solar panels. The energy can be output in an alternating current (AC) or direct current (DC) to one or more transmission sites 14 at a high voltage. The transmission site 14 can “step-down” the voltage, if AC, or “step-down” the voltage and convert to AC, if DC, and can deliver the stepped-down AC to one or more sub-transmission facilities 16. The sub-transmission facility 16 can further step-down the AC and deliver the AC to one or more distribution sites 18. The distribution site 18 can further step down the AC and deliver the AC to one or more customer sites 20. At the customer sites 20, the AC can be used to power any number of devices.
In some circumstances, the generation 12, transmission 14, sub-transmission 16, and distribution 18 resources are all owned and operated by a single entity. In these cases, the supply of energy needed to meet the demand for any particular time at any particular location is determined internally by the owner/operator of the vertically-integrated system.
In many circumstances, however, the owners/operators of the generation 12, transmission 14, sub-transmission 16, and distribution 18 resources are separate entities. In this case, wholesale energy markets may be created to allow these distributed resource owners to successfully match energy supply and demand. In these wholesale energy markets, energy producers (e.g. generators) offer energy supply into an energy marketplace for the delivery of a specific quantity of energy at a specific point in time (either immediately or at some future time). Energy consumers (e.g. utilities), bid into this same market to meet their real-time or forecasted energy demands. These sell and buy bids are used to match energy supply and demand for a specific time at a specific location, resulting in a market clearing price for each unit of energy supplied into the electrical system during that time and at that location. In order to dispatch energy onto the grid, an energy supplier must place a sell bid that is at or below the market clearing price for energy. In order to take energy from the grid, an energy consumer must place a buy bid that is at or above the market clearing price for energy.